Same Day ACH – A Step (or Lurch) Ahead

NACHA recently announced plans for a phased introduction of same-day settlement for ACH. I spoke with NACHA President and CEO Jan Estep this morning about the initiative.

First of all, I congratulate Jan – and the ACH community – for picking up the fallen banner, for as we know, a previous version of this was defeated by NACHA members last year. It’s not easy to get some 13 thousand financial institutions to agree on anything. But what NACHA is proposing is a good step forward – if, of course, they can get the banks to agree this time!

There are many threads to the discussions underway in this country on the general subject of payments improvement – making payments faster, better, and cheaper for end-users. The Fed is engaged with banks and non-banks in a thoughtful process to determine paths towards payments system improvement, and the possible role of the Fed in providing or facilitating new solutions. Existing networks – particularly debit networks – are looking at how their “rails” can be repurposed to “push” credit payments through them. And now the ACH, with its enviable ubiquitous reach to U.S. bank accounts, is proposing same day settlement.

You can read the press release – or go to the NACHA conference – to hear more about this. But the real details will emerge later, when NACHA proposes actual rules. For now, Estep emphasizes that this is the important settlement “layer” – and that products and services will be defined by financial institutions that can rely on the reduced counterparty risks enabled by this initiative. NACHA’s vision is that same day settlement will start with “push” credit transfers – for all ACH types, including P2P, payroll, bill payment and B2B. Receiving banks (RDFI’s in the ACH system) would be required to receive the transactions, and rules are expected to specify same-day posting to recipient accounts. Later phases would incorporate “pull” debit transactions.

Those of us who are looking, with some degree of longing, at schemes introduced, or in the works, in other countries (Faster Payments in the U.K., SPEI in Mexico, etc.) may see the NACHA initiative as “not enough”. But in a country with this many banks, we may need to lurch forward, rather than smoothly launch new services.

The issue of interoperability, however, remains. The ACH isn’t the only game in town. There are multiple networks and service providers chasing the immediate transfer ball: Fiserv Popmoney, FIS PayNet, clearXchange, PayPal, SquareCash, Visa and MasterCard – just to name a few. How am I going to send money to you (or to anyone) if we’re all using different networks?